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2018 (7) TMI 214 - AT - Income TaxUnexplained cash credits - addition of share application money as the assessee failed to establish the identity, creditworthiness and genuineness of the transaction - CIT-A deleted addition - Held that:- Assessee in this case has duly submitted all the necessary details in respect of the share application received which included name, address, company incorporation details, share application details, balance sheets, PAN, bank statements, acknowledgement of income tax return filed and confirmation from the parties. The Assessing Officer has not found any fault in these submissions except that he wanted to verify the details by asking the assessee to produce the promoter/director of these companies. The assessee has duly discharged its onus and no onus was cast on the assessee in the impugned assessment year to produce the persons or the books from the investment companies. The requirements of enquiry and obtaining explanation from the person making the investment in these circumstances have been brought into the statute books by amendment to section 68 to be prospective as they were effective only from 01.04.2013. Admittedly, the present assessment year being assessment year 2010-11, the Assessing Officer was not justified to take up the issue of obtaining explanation from the Directors/promoters of the investing companies. - Decided in favour of assessee. Business income taxable u/s. 28(iv) - income accrued to the assessee u/s. 28(iv) - assessee had made investment in the shares of PPSL at a discounted rate as PPSL had issued shares to few other entities and individuals at higher rate during the same period - Held that:- In the opinion of the Assessing Officer the benefit u/s. 28(iv) accrues. In this regard, we are of the opinion that while question of benefit u/s. 28(iv) of the Act accrues or not, will arise only if there is in fact any benefit. The above facts, that the said company (PPSL) was continuously incurring losses and has huge accumulated losses clearly indicate that the price, at which it was purchased cannot be said to be understated. Hence, there is no question of any kind of gain arising in purchase of these shares at the stated price above. Assessee is the purchaser of the share as investment and there is no incident that has taken place during the current accounting year which can be said to lead to any income accrued or arisen during the year. If at all the assessee transfers the shares then the probable benefit or profit, if any, in question can be brought to tax in those particular years as long term or short term capital as the case may be. In this regard, from a reading of section 28(iv) of the Act and the corresponding amendment in section 2(24) it is clear that even when the assessee purchases goods or assets at a price lower than the market price, under whatever circumstances the same cannot be brought to tax u/s. 28(iv). The assessee has clearly submitted that there is no business relationship as such between these parties. However, the Assessing Officer has disbelieved these submissions by generally referring to an enquiry which had revealed that some group companies have given corporate guarantees to PPSL for term loan. These unsubstantiated claims without specific finding about the name of the entity involved cannot be said to be giving rise to a business relationship among the parties. The assessee has simply purchased some shares of a loss making company at less than the face value from third parties. The assessee has not sold those shares and obtained any benefit of any kind whatsoever. Hence, the addition u/s. 28(iv) is not at all justified - Decided in favour of assessee.
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